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Time to relook dual class shares - with sufficient safeguards of course
Since the Companies Act is being amended to permit dual class (DC) shares, it's perhaps useful to discuss the desirability of such instruments. Mention such shares to a shareholder rights advocate and chances are you'd invoke feelings of distress and distrust. The idea of allowing one set of shareholders to wield different voting powers over another is abhorrent to many who place their faith in the "one man, one vote'' system that underpins the ideal of shareholder equality. Yet advanced markets like the US allow certain companies to practice shareholder discrimination - recall that Manchester United spurned Singapore as a listing venue because at that time, dual class (DC) shares were not allowed here, whilst Alibaba picked the US for its IPO since Hong Kong also did not allow such listings.
Being a MU fan myself, I would have liked to see the football club list here, which perhaps makes me a little biased towards thinking that if sufficient safeguards can be installed, it's time we considered allowing DC shares here.
The main reason for thinking this is that a properly functioning stock market has to be able to offer customers a wide variety of instruments and DC shares are simply another such offering. Of course, there has to be plenty of careful thought before opening the doors to DC listings - we would have to define the type and size of companies that qualify, decide on how the voting rights are to be apportioned, the type of safeguards and so on. But it stands to reason that as markets evolve over time, so should existing, possibly outdated business arrangements. Moreover, if commercial realities dictate, then serious consideration should be given to ways that shareholder choice and wealth can be expanded.
It is however, worth bearing in mind that when the shares of "strategically important'' companies like the banks, SPH, SBS, SPC and SIA were split into Local and Foreign tranches back in the 1990s that arrangement eventually came to grief and the tranches merged after about 10 years. The lessons of that failed experiment at discriminating between local and foreign shareholders must be borne in mind when contemplating introducing DC shares here. But by and large I think it's an idea whose time has come.